T RAINING P ROGRAMME F OR T HE G OVERNMENT O F I NDONESIA The Agreement on Agriculture Jogjakarta, Indonesia 26-29 March 2019
A GENDA Why discipline agriculture in the WTO? I. The scope of the Agreement: what products are II. covered? III. The Three Pillars: export subsidy disciplines, rules on market access and domestic support disciplines. IV. Export subsidies (Articles 3.3, 8, 9 and Nairobi Decision) Market Access (Article 4.2) V. VI. Domestic Support Commitments (Articles 6, 7 and Annex 3) VII. Measures exempted from the reduction commitments (Article 6.2 and Annex 2)
W HY D ISCIPLINE A GRICULTURE ? • Agriculture is one of the few economic sectors which has its own agreement within the WTO. Other than the broad WTO distinction between goods and services, all other WTO provisions are neutral as to the economic sector involved. Agreement on Agriculture was one of the key achievements of the Uruguay Round. • Before the Agreement on Agriculture trade in agriculture was characterised by distortions and impediments to agricultural trade, including import bans, quotas, variable import levies, minimum import prices and non-tariff measures maintained by state trading enterprises. • Excessive market price support meant expanding domestic production which not only replaced imports completely but resulted in structural surpluses. Export subsidies were then used to dump surpluses onto the world market, depressing world market prices.
W HY D ISCIPLINE A GRICULTURE ? • By agreeing to cap and reduce these subsidy levels and import barriers, developed countries hoped to bring an end to "subsidy wars" that were draining their national budgets and driving down world commodity prices. • Farmers in developing countries were forced to compete with the treasuries of the world’s richest countries in export markets and in their home markets. • To create a "fair and market-oriented agricultural trading system", ddisciplines were introduced to address the structural distortions in agricultural trade.
W HY D ISCIPLINE A GRICULTURE ? • Agreement on Agriculture seeks to reduce restrictions on trade in agricultural products by introducing disciplines to: o reduce subsidized exports; o increase market access; o reduce domestic support measures. ➢ These are referred to as the three pillars of the Agreement on Agriculture
T HE SCOPE OF THE A GREEMENT : WHAT PRODUCTS ARE COVERED ? • Article 2 of the AoA ("product coverage") provides that "this Agreement applies to the products listed in Annex 1 to this agreement". • Annex 1 ("Product Coverage") captures a full range of agricultural products (products in HS chapters 1 to 24): o basic agricultural products such as wheat, milk and live animals o products derived from them such as bread, butter and meat o processed agricultural products such as chocolate and sausages. o wines, spirits and tobacco products o fibres such as cotton, wool and silk, o raw animal skins destined for leather production. • Excludes "fish and fish products" and forestry products.
E XPORT S UBSIDIES • The general rule in the WTO is no export subsidies . Article 3 of the SCM Agreement prohibits all forms of export subsidies " [e]xcept as provided in the Agreement on Agriculture... ". • The AoA "carves out" agricultural subsidies from the general prohibition in Article 3 of SCM Agreement. o Unlike the SCM Agreement, the AoA does not require Members to eliminate all their export subsidies ( BUT NOTE Nairobi Decision). o Export subsidies listed in Article 9.1 may be permitted subject to reduction commitments expressed in the form of budgetary and quantity commitments in a WTO Member's Schedule (Article 9). o Export Subsidies not listed in Article 9.1 are prohibited if they result in or threaten to circumvent export subsidy commitments (Article 10). o All other agricultural export subsidies are prohibited (Article 8).
E XPORT S UBSIDIES Article 3.3 of the AoA contains obligations relating to both: ▪ Scheduled Agricultural Products ("A Member shall not provide export subsidies listed in paragraph 1 of Article 9 in respect of agricultural products … specified in Section II of Part IV of its schedule in excess of the budgetary outlay and quantity commitments specified therein"). ▪ Unscheduled Agricultural Products ("A Member … shall not provide such subsidies [i.e. listed in Article 9.1] in respect of any agricultural product not specified in that Section of its Schedule"). Thus ▪ WTO Members can provide agricultural export subsidies listed in Article 9.1 but only with respect to agricultural products that have been scheduled and to the extent of the reduction limits are set out in their schedules. ▪ Exception for developing countries unscheduled products: Article 9.4.
WHICH WTO MEMBERS MAY PROVIDE EXPORT SUBSIDIES? The following 25 Members are entitled to provide agricultural export subsidies (only with respect to specified products and subject to reduction commitments): Australia (5) EU (20) Norway (11) Turkey (44) Brazil (16) Hungary (16) Panama (1) United States (13) Bulgaria (44) Iceland (2) Poland (17) Uruguay (3) Canada (11) Indonesia (1) Romania (13) Venezuela (72) Colombia (18) Israel (6) Slovak Rep. (17) Cyprus (9) Mexico (5) S. Africa (62) Czech Rep. (16) New Zealand (1) Switzerland-Liechtenstein (5) During the Uruguay Round the following reduction commitments were agreed: o Developed-countries: average of 36% by value and 21% by quantity over a six-year implementation period. o Developing countries: average of 24% by value and 14% by volume over a 10-year period. o LDCs have no reduction commitments. (Article 15)
E XPORT S UBSIDIES The Doha Ministerial Declaration calls for "reduction of, with a view to phasing out, all forms of export subsidies". As an outcome of the negotiations, Members agree to establish detailed modalities ensuring the parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect by a credible end date . See WT/L/579, para. 17.
T YPES OF E XPORT S UBSIDIES Article 9.1 lists six types of export subsidies: (a) the provision by governments or their agencies of direct subsidies ... contingent on export performance; (b) the sale or disposal for export by governments or their agencies of non- commercial stocks of agricultural products at a price lower than the comparable price charged for the like product to buyers in the domestic market; (c) payments on the export of an agricultural product that are financed by virtue of governmental action, whether or not a charge on the public account is involved … ; (d) the provision of subsidies to reduce the costs of marketing exports of agricultural products (other than widely available export promotion and advisory services) including handling, upgrading and other processing costs, and the costs of international transport and freight; (e) internal transport and freight charges on export shipments, provided or mandated by governments, on terms more favourable than for domestic shipments; and (f) subsidies on agricultural products contingent on their incorporation in exported products.
A RTICLE 9.4 OF THE A O A ▪ Article 9.4 of the AoA provides: o "During the implementation period, developing country Members shall not be required to undertake commitments in respect of the export subsidies listed in subparagraphs (d) and (e) of paragraph 1 above, provided that these are not applied in a manner that would circumvent reduction commitments." ➢ i.e. developing countries would be able to introduce these types of subsidies provided that they had not scheduled the products in Part IV, Section II. ▪ Paragraph 8 of Nairobi Decision on Export Competition extended the duration of Article 9.4 until the end of 2023 . It provides: Developing country Members shall continue to benefit from the provisions of Article 9.4 of the Agreement on Agriculture until the end of 2023, i.e. five years after the end-date for elimination of all forms of export subsidies. Least developed countries and net food-importing developing countries listed in G/AG/5/Rev.10 shall continue to benefit from the provisions of Article 9.4 of the Agreement on Agriculture until the end of 2030.
A RTICLE 10 OF THE A O A ▪ Article 3 of the AoA is limited to disciplining the export subsidies listed in Articles 9.1 of the AoA. What about the types of subsidies not listed in Article 9.1? ▪ Article 10.1 of the AoA: "Export subsidies not listed in paragraph 1 of Article 9 shall not be applied in a manner which results in, or which threatens to lead to, circumvention of export subsidy commitments; … ". ➢ Article 10 refers inter alia to export credits and food aid.
A RTICLE 10 OF THE A O A ▪ In US – FSC the Appellate Body found that the FSC measures at issue, although not export subsidies listed in Article 9.1, were agricultural export subsidies inconsistent with Article 10.1. "Members would certainly have 'found a way around', a 'way to evade', this prohibition if they could transfer, through tax exemptions, the very same economic resources that they are prohibited from providing in other forms under Articles 3.3 and 9.1." (para. 150)
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